VCC Bank targets Southeast expansion through ongoing USD 10m capital raise, CEO says

May 17, 2019 | In the News

Featured in Mergermarket
by Xinyi Jiang in Charlottesville, Virginia

VCC Bank, a for-profit commercial bank owned by nonprofit Virginia Community Capital (VCC), plans to expand into more Southeast states and within Virginia, bolstered by an ongoing USD 10m capital raise, said CEO Jane Henderson.

The bank, which opened in 2008, focuses on making loans in Virginia to support affordable housing projects, small businesses, healthcare, clean energy initiatives, and other projects that improve access to healthy foods, schools and community centers. It wants to lend more to these projects in Virginia and expand beyond its existing markets.

“We are being asked to do same type of lending in other geographies that don’t have an organization like us,” Henderson said. To expand outside of Virginia, it is first targeting nearby Southeast markets such as West Virginia, Maryland, North Carolina, South Carolina, Kentucky, and Tennessee because it is familiar with the regions already, said Henderson. It plans to build businesses in new states in 18 to 24 months, she said. It is also considering growth outside of the Southeast.

The bank aims to grow its assets to USD 300m to USD 350m in three to five years, from the current level of around USD 200m.

To support its expansion plans, VCC Bank is selling USD 10m of Class B non-voting common stock in an offering it hopes to complete this year. It launched the private placement at the end of last year and raised USD 2.4m from a mix of investors that include some banks, individuals and religious organizations. Its current investors are inside and outside of Virginia.

The company is “actively” meeting with interested investors to help it close the remaining USD 7.6m “as soon as possible,” said Henderson.

Ideal investors are other banks seeking Community Reinvestment Act credits, corporate foundations that care about social impact, family offices whose clients are interested in impact investing and high-net-worth individuals, CFO Clyde Cornett said. It has held informal conversations with several investors and scheduled some follow-up visits, he said.

VCC Bank targets a 0.75% annual return on assets and a 4.75% to 7% annual return on equity, according to the CFO. It plans a 20% to 30% dividend payout ratio on the Class B stock, he added.

The bank has three offices in Christiansburg, Norfolk, and Richmond. It doesn’t plan to open any new offices.

The bank is not considering a sale and hasn’t been approached by any suitor, Henderson said, noting that when traditional banks acquire each other, they care more about profits than community impact.

Virginia Community Capital owns a 99% voting stake in VCC Bank. VCC Bank had USD 150m total deposits and USD 21m total shareholder’s equity by the end of last year. The whole parent company has 65 employees.

VCC Bank works with Williams Mullen for legal counsel.